Can’t revisit decision to change tax transfer date, Centre tells states
The Union finance ministry has informed states that the devolution of central taxes will happen on the 15th of every month instead of the 1st, for the remaining months of this financial year, and from 2018-19, it will be transferred once every three months.business Updated: Oct 18, 2017 12:12 IST
The Centre has communicated to states that there will be no rethink on the change in the date for transferring their share of federal taxes.
As reported by HT on Monday, the Union finance ministry had informed states that this devolution of central taxes will happen on the 15th of every month instead of the 1st, for the remaining months of this financial year, and from 2018-19, it will be transferred once every three months.
Following this, states have expressed their displeasure to the central government and had requested reconsideration. According to the 14th finance commission, 42% of central taxes are shared with states and this money is used by them for paying salaries, pension, wages, administrative costs and interests. So, it is crucial that this money is transferred on the first day of every month.
“We have got representation from states and we are looking into them. But we have also explained to them the rationale behind the change in schedule of tax devolution to them,” said a senior government official who did not wish to be named.
The Union finance ministry has said the tax realisation under the GST has been shifted to the 20th of every month. Moreover, corporate and income taxes are received in quarterly installments, which makes it difficult to transfer the states’ share at the beginning of every month.
In fact, the central government has already had to borrow twice in the past six months to keep the tax devolution commitment to states, reads a note prepared by finance ministry.
“Tax receipts pick up as a financial year progresses, but the amount of revenue to be shared with states is already committed and then transferred in 12 installments throughout the year. But any change in the schedule has been done in consultation with states otherwise it is extremely unfair on them. How will states manage their expenses?” said a former finance secretary.
Top sources in finance ministry said advance notice has been given to states about quarterly transfer of tax money, so they should be prepared from the next year.